Below are the expected returns for the past year for the index tracking the Sarajevo Stock

Exchange $($SASE$)$ and one of the leading firms on the exchange, KLASR:

a$.$ Calculate the average arithmetic and geometric return for SASE and KLASR. Which approach is more

appropriate for evaluating past performance? Why?

b$.$ Calculate the standard deviation of returns for SASE and KLASR.

c$.$ Assuming you are a risk averse investor and expect the next $12$ months to be similar to the past twelve

months. If you had to make a choice between investing in either the SASE or KLASR which one would

you choose? Why?

d$.$ Assuming you could hold $50\%$ of your funds in each security would this change your decision? $($please

calculate the average return and standard deviation of the equally weighted portfolio $-$ assume a

correlation coefficient of $-\mathrm{.}86$